Disclosure: Privacy Australia is community-supported. We may earn a commission when you buy a VPN through one of our links. Learn more.
The Best Forex Trading Platform in Australia
In the last couple of years, some of the best forex trading platforms in Australia have been on a roll, spreading their offerings to enable the region become one of the leading online trading hubs. This has transformed Australia into an important center of the world trading industry.
Trading in foreign currencies is popular in Australia for several reasons. The most important is that it facilitates international trade by providing the means through which one currency is exchanged with another.
But beyond a means of exchange, the Australian forex market also provides an opportunity for savvy business-oriented people to speculate, say, whether the value of the US Dollar (USD) will appreciate against the Euro (EUR).
For most Australian investors, however, the attraction to forex trading lies in the access it provides to a market that is much bigger in scope than that of the traditional stock exchange.
👉 Quick Note – > You might be wondering why a security geek like me is writing about Forex trading. The answer is pretty simple, I’ve been an active day trader since University. I’ve also had the pleasure of being contracted by several firms to do security audits on trading platforms, mostly in the crypto space. My reviews are a mix of first hand experience both trading and understanding the back office infastructure that some of these forex brokers utilize.
Disclaimer: CFD trading is a dangerous game to be playing for those with no experience in the stock market. Honestly, we would not recommend it to anyone except intermediate traders and experts.
Our list will help you pick the perfect online stock trading platform for your needs. However, using a quality CFD platform doesn’t guarantee your trading will retain the same quality nor it will make you a millionaire. If anyone promises that to you, they are a fraud and you should stay away.
⚠️Forex Trading Is Risky – Please know that forex trading is extremely risky with the majority of new signups losing money. Forex brokers make large comissions off trades and pass off a certain amount of risk to investors. Be cautious and do your research. ⚠️
Security and Regulatory Oversight
As we constantly harp on, “digital security is extremely important when it comes to trading online.” In the world of financial transactions, the initial foundation of security is laid by a robust regulatory oversight that keeps bad actors out and ensures everyone plays by the rules.
To trade forex in Australia, you need to do so through a forex broker who has been conferred with the right regulatory authority by the Australian Securities and Investment Commissions (ASIC). ASIC is empowered to regulate the financial market in Australia.
Though the ASIC regulates numerous forex traders, the sheer size of Australia means that traders in the southern hemisphere routinely look beyond their borders in order to discover the best brokerages.
However, for Aussies, there are advantages to choosing an Australian forex trader which shouldn’t be overlooked. Some of these advantages include a connection to local banks and the availability of strong customer support during local trading hours.
While any forex broker in Australia with the ASIC can accept forex and CFDs (Contract for Difference), it still doesn’t alleviate the challenge members of the public face in differentiating which brokers are the cream of the crop, and those which are subpar.
This is the public service this article is meant to address. But first, some caution on the risk involved with forex trading.
Our Criteria for Selection
However, with so many forex traders already existing and operating in Australia, it then begs the question: what conditions do we use to sift the wheat from the chaff? How do we ensure our customers are provided with the elite performers in this industry?
This should be a moot point anyway, but it bears repeating nonetheless: the overriding consideration when dealing with your hard-earned money, especially when it involves handing it over to a third party for some kind of financial intermediation is security.
As we alluded earlier, the security and privacy of the best online trading platforms start with the strength of the regulatory bodies mandated to oversee them. If they are lax and inadequate, it impacts their ability to provide comprehensive oversight.[/cs_text][cs_text]Our due diligence started with ensuring that only ASIC authorized brokers made the list, since this is the criteria for doing business in Australia. Other factors were the clout and reputation of the regulatory authorities overseeing the brokerage firm, as not all issued licenses are created equal. Therefore, they are weighted by importance and demarcated into tiers based on trust level.
To identify trustworth brokers is no mean feat, so employed what is called a Trust Score. For the avoidance of doubt, we didn’t originate this methodology, however, all industry practitioners borrow established best practices.
The Trust Score is equivalent to an individual’s credit score, but in this instance applies to a forex trader. It is calculated based upon an algorithm that collects public available information on each forex trader; these variables are subsequently weighted and calculated in order to determine the overall trustworthiness of the broker.
Some of the other variables used are the total years spent in business, their corporate structure, and the type of regulatory license held. The longer the time spent in business, the better as this leaves a longer footprint on their business practices and overall reputation.
Summary of Top Australian Brokers
Choosing the absolute best forex trading platform in Australia was no simple task. The top picks we selected were based upon core requirements for Australian traders. After we created our list of ASIC authorized brokers, we subsequently ranked them based upon the aforementioned Trust Score.
|Forex Broker||Best For||Trading Platform||Bottom Line|
|1. IG Markets||Overall||IG proprietary web application, cTrader, cAlgo, MT4, ProRealTime.||Well-rounded, advanced platform with versatile tools|
|2. Pepperstone||Spreads + Currency Pairs||MetaTrader4, MetaTrader5, and cTrader.||Revolutionary approach that combines raw spreads with low fees|
|3. eToro||Social Trading||Proprietary software – OpenBook, the WebTrader, and Mobile Trader||Social trading through social copying and emulating the trading strategies of other successful traders|
|4. Plus500||Beginners||WebTrader||Provides quick, and reliable options through simple design and ease-of-use|
|5. FXCM||Best Well-Rounded Offering||Trading Station desktop, MT4, NinjaTrader||Impressive platform with numerous trading styles and comprehensive research tools|
1. Best Forex Broker Overall: IG Markets
- Regulations: Regulated across the globe by at least six tier-1 jurisdictions, including ASIC and FCA
- Minimum Deposits: $200 AUD or its equivalent in your preferred currency
- Platforms: cTrader, cAlgo, MT4, MT5
- Inactivity fee charged: Yes, after 2 years of inactivity, $12 per month
- Excellent industry reputation
- Outstanding educational resources
- Exceptional web trading platform
- Serves thousands of markets
- Competitive spreads starting from 0.6 pips
- Flexible forex trading with access to over 15,000 markets
- Incur dormant account fees
- Social and copy trading not yet available
- High stock CFD fees
IG is a forex broker that is a trusted name brand across the globe. Founded in 1974, its longevity and long standing business operations has ensured competitive fees along with an extensive product catalog.
It is regulated by several bodies across the globe, such as the Australian Securities Investment Commission (ASIC), the Financial Conduct Authority (FCA) and the Federal Financial Supervisory Authority (BaFin), among others.
In all, it is regulated by about six tier-1 jurisdictions. As a result, it is an exceptional low-risk and safe broker for forex and CFD trading. In addition, IG also provides an extensive list of tradable products which include over a 100 forex currency pairs, commodities, CFDs, indices, gold, bitcoin, and other cryptocurrencies.
Unlike other forex brokers which made our list, it has the distinction of being listed on the London Stock Exchange. This also means it discloses its financials as a publicly traded company, furthering fortifying its reputation.
Platforms and Tools
IG’s excellent platform offers widespread functionality, serving traders of different skill sets and experience levels. As a result, it is considered the best forex broker for both market professionals and small traders.
One of the biggest draws for traders with IG is that unlike so many of its counterparts, it offers the opportunity to both trade forex alongside individual stock market CFDs on the same platform.
Its main trading platform is web-based and proprietary. It is user-friendly, intuitive, and easy to use. The platform provides tight spreads, fast trade execution, and access to more than 15,000 markets. It features API interfaces to facilitate choice, basic management tools, stop-losses, and price alerts.
Along with its proprietary web application, you can also trade with IG with the industry standard MetaTrader4 (MT4) platform. However, it is worth noting that a lot of MT4 only forex brokers allow you to trade only in CFDs. Conversely, the IG trading platform allows traders to trade on a whole range of CFDs along with the other commodity markets, indices, and forex that every broker offers.
Currently, no MetaTrader5 is available, but users can upgrade to ProRealTime as long as modest monthly trading requirements are satisfied.
Latency and Fast Execution
Fast and reliable execution on all trades goes together with the IG guarantee. Its systems and trading platform have been engineered to handle high volume of traffic along with a large number of trades. Moreover, the trading platform permits trading outside of standard trading hours in some CFD markets.
There are multiple options for funding and withdrawing money. However, IG’s fees are high for stock CFDs.
Education and Research
IG endeavors to provide industry leading education and research tools on its platform. Using its DailyFX analysis, the platform provides regular market updates, comprehensive news, and videos. This educational portal has hundreds of market topics and in-house analysis ranging from fundamental analysis, to intermediate technical and then expert.
You can build your trading skills with the multiple live and archived webinars available. All these resources are mainly produced in-house, and serve to identify crucial news catalysts, highlight key events, and cover major currency pairs.
2.Best Spreads + Currency Pairs: Pepperstone
- Regulations: ASIC and FCA
- Minimum Deposits: $200 AUD or its equivalent in your preferred currency
- Platforms: cTrader, cAlgo, MT4, MT5
- Inactivity fee charged: None
- Great customer service
- Ability to trade the lowest spreads commission free
- Provides cryptocurrency trading opportunities
- Low trading and non-trading fees
- Lacks sophistication for conditional
- There is no single stock CFD coverage
- Provides only basic news flows and no fundamental trading/market data
What makes Pepperstone stand out as the premier Australia trading platform? Well, by now you should know how we feel about safety, and Pepperstone has it in spades. Pepperstone is regulated not by not one, but two top-tier financial authorities: the Australian Securities and Investments Commission (ASIC), and the UK’s Financial Conduct Authority (FCA).
Having both FCA and ASIC as tier-1 regulators means that traders can be confident their funds are safe. By extension, Pepperstone provides some of the safest business practices to safeguard their traders’ investments.
It was established in 2010 and it has quickly distinguished itself as a highly regarded forex broker. Pepperstone provides a broad range of forex portfolio to allow users to unlock more opportunity, with over 80 currency pairs available to traders to choose from.
This top-tier Australian brokerage has cemented its status by providing its traders a full-featured portal which not only focuses on forex, but also index instruments and commodities.
Pepperstone provides an attractive leverage, up to 500:1 (with ASIC regulation in Australia), with spreads starting 0.0 pips. In common language, this means if you have only $1 in your trading account, then you are capable of trading $500 in the forex market. These low spreads are available on more than 150 instruments such as forex, index CFDs, commodities, and cryptocurrencies.
Apart from lighting fast trade execution (orders executed in less than ~30ms) and astute customer service, its reputation is also built on providing a seamless trading experience by providing a variety of funding methods.
Opening a Pepperstone account, among other things, starts with selecting a base currency. Its competitive advantage starts with its Pepperstone Standard account fashioned for beginners.
This account charges no commissions and permits some of the lowest spreads on currency. Both the Standard and Razor Pepperstone account offers these overlapping similar features:
- ☑️ At least three forex trading platforms (MT4, MT5 and cTrader)
- ☑️ More than 80 currency pairings
- ☑️ Requiring minimum deposits
- ☑️ Providing choice of trading lots
- ☑️ Blazing fast trade execution times as low as 0.05 seconds
- Australia is a vast country and to shorten the distance between it and the trading hubs all over the globe, Pepperstone adopted fibre optics infrastructure from Sydney to Wall Street in order to reduce latency.
- ☑️ Edge technologies and partnerships to facilitate “one-click trading” to ensure that with
Advantages of Pepperstone Standard Account
Each of Pepperstone accounts applies charges and technology differently. For instance, compared to its Razor account, Pepperstone’s Standard account has a wider spread. But the main differentiating factor is that the Standard account is effectively a no commission account.
Another benefit of the Standard account is its transparency with regard to upfront costs. Adding a PIP to the spread and subsequently not applying fee charges is equivalent to having a service provider that provides a flat fee for its services to customers.
As a result, a trader can anticipate what their cost will be with just a few calculations. Moreover, because no-commission accounts tend to be easier to manage, they are great for beginners.
In actual implementation, Pepperstone’s Standard Account technology uses what is called straight through processing (STP) in order to determine the spreads for a trader’s standard account. In practice, this entails sending your position to a liquidity fx broker and consequently adding 1 PIP to the price.
Highlights of Pepperstone Razor Account
Pepperstone’s Razor account doesn’t add one PIP to the spread, thereby making it offer a tighter spread compared to its Standard counterpart. Rather, a commission is charged instead.
The Razor account is able to achieve these tighter spreads through an Electronic Communication Network (ECN) style execution that provides traders with their buy and sell price. Pepperstone doesn’t manipulate nor interfere with the spread, thereby paving the way for the ECN technology to allow for the tightest spreads.
However, the Razor account charges a commission ($3.50 per $100k traded) though its spreads remain low.
Combining smart technology with low spreads and commissions isn’t the only thing that makes the Pepperstone platform stand out. In the tight-throat area pricing, Pepperstone still manages to offer competitive fees to its customers.
This starts with its three online trading platforms which it provides for free, namely: MetaTrader4, MetaTrader5, and cTrader. The first, MetaTrader4 is the most popular of the three, while MetaTrader5 is touted as the most powerful.
The MetaTrader 4 (MT4) forex platform’s popularity hinges on its ease of use, seamless charting, and the ability to allow the execution of trades easily.
3. Best Social Trading Platform: eToro
AFSL 491139. High risk to capital.
- Regulators: ASIC and FCA
- Minimum Deposits: $50
- Platforms: Restricted to the eToro trading platform
- Inactivity fee charged: Yes, if inactive for 12 consecutive months, a $10 fee is charged
- Withdrawal fee: $5, withdrawals in currencies other than USD are subject to conversion fees
- Number of FX pairs: 47
- One of the most robust social/copy trading platforms
- Boasts remarkable cryptocurrency catalog
- Impressive charting tool
- CFD fees are low
- Higher than average trading costs for forex trades
- Inadequate customization available on platform
- Streaming, especially for news not available
- Charges withdrawal fee
In this era of ubiquitous social networking, eToro has cracked to code on how to deploy easy-to-use copy trading as a platform. This allows traders to not only learn, but to copy the trades of others like themselves across as much as 1,900 instruments, even trading on popular cryptocurrencies.
eToro was founded in 2007, and is a well-known Fintech startup firm. Although it has embraced cutting-edge cryptocurrencies and trendy social copy trading, it still remains a popular hub for the less-experienced investor.
While reviewing eToro, we found that this undisputed world leader in social trading networking currently spans about 6 million users in 14 countries, boasting a client-base of more than 10,000 worldwide.
Although cryptocurrencies are still relatively new and volatile, however, we consider eToro to be safe because it is regulated in Australia by the ASIC, while its UK clients fall under the banner of Financial Conduct Authority (FCA). Moreover, while the platform follows risk-control rules it must be noted that employing copy-trading in and of itself doesn’t guarantee gains or losses.
Using Social Copying as a Trading Philosophy
Social trading has become the hallmark which eToro has used to distinguish itself from the bevy of forex trading platforms in Australia.
Social trading is a simple concept that allows users to copy forex signals (trades) of other live investors as they occur in real-time. Forex trading platforms such as eToro make it possible to follow a select group of investors so that each time they perform a trade, you can subsequently copy their trades by automatically replicating these in your brokerage account.
eToro is regulated in two tier jurisdictions. It provides a safe broker, low risk environment for forex and CFD trading by providing two tier-1 jurisdictions and one tier-2 jurisdiction.
Tools and Operation
The eToro platform both provides live and demo accounts. Since the social trading experience differs significantly from traditional forex trading, eToro graciously offers an unlimited number of demo accounts for its traders to experiment with the social trading concept.
Traders just starting out are afforded the opportunity to practice their strategies with $100,000 of virtual money. Its news feed allows you to receive updates from investors.
To incentivize top brokers to share their data, eToro gives payouts based on how many copies the trader generates. Consequently, experienced traders are able to earn more money based on their trades as a reward of people copying their strategy.
Signing up for eToro is quite easy. The app has a simple, clean interface and provides seamless integration with the eToro wallet. It comes equipped with charts and analysis tools that enables you to follow coins trends and cryptos easily.
4. Best Trading Platform for Beginners: Plus500
- Regulators: ASIC and FCA
- Minimum Deposits: 100 AUD
- No deposit fees
- Withdrawal fee: None
- Platforms: WebTrader
- Inactivity fee charged: Yes, $10 per month charged after three consecutive months of inactivity
- Intuitive and easy-to-use platform
- Comes with low trading fees
- Listed on the London Stock Exchange
- Access to more than 2,000 trading instruments
- Only limited product portfolio available
- Sparse research tools
- Provides an average, mid-range educational section
- Charges inactivity fee
Founded in Israel in 2008, Plus500 is a London-based, Stock Exchange listed global CFD and FX broker that has been able to distinguish itself as one of the premier forex trading platforms for Australians. It is regulated by several top-tier organizations, including Australian Securities and Investments Commission (ASIC), and UK’s Financial Conduct Authority (FCA) .
Plus500 has a lot of in-built flexibility that makes it attractive for first-time forex traders, such as an intuitive, seamless platform that includes a well-designed mobile app that equally measures up to the standard. Opening a Plus500 account is a digital, coherent, and harmonious process without hassles.
Plus500 trading fees are low, and its spread is also one of the lowest in the market (EUR/USD spreads are often below 1 pip).
However, we awarded Plus500 the title of best forex trading platform for beginners because the platform offers only basic features which in turn makes it uncomplicated and focused for newbies to forex trading. In addition, its excellent user-friendliness also makes it an outstanding choice for those new to forex trading.
Platform and Trading Conditions
Plus500 is a market-maker, which means that it actively quotes two sides – both the buy and sell – in the anticipation of making a profit on the bid ask spread. It seeks to make a profit from the difference in the buy and sell spreads.
Therefore, an automated system is triggered as soon as a user places a trade on the Plus500 platform, setting a hedging trade to protect Plus500 from any potential loss by assuming the role of a counterparty.
It is a closed system where Plus500 is the counterparty; as a result, there are few requotes but there is fast trade execution.
Account Base Currencies
Compared to other platforms, Plus500 provides a number of base currencies; even the minor ones. However, the exact number isn’t transparent but from our research it includes at least 10 compared to eToro’s one. Moreover, you need to contact support if you need to change your base currency.
Why does it matter the number of base currencies carried by a forex trading platform? Well, because it helps you to avoid conversion fees. If your trading account is funded in the same currency as your bank account, or you even trade assets in a similar currency as your trading account base currency, then you are able to avoid paying conversion fees.
Fees, Deposits, and Options
Along with charging no deposit fee, Plus500 also provides several options for investors to deposit money into their accounts such as bank transfers, using debit/credit cards, then via PayPal or Skrill.
5. Most Well-Rounded Trading Offer: FXCM
- Regulations: ASIC and FCA
- Platforms: FXCM trading platform, MT4, NinjaTrader
- No account, deposit, or withdrawal fees
- Inactivity fee charged: Yes, $50 fee for one-year of inactivity
- Minimum Deposits: For the standard account, $50 in non-EU countries; otherwise $360 (£300) in the EU
- Provides social/copy trading capabilities
- Homegrown trading station, along with MetaTrader
- High-quality educational content
- Good technical research tools
- Provides third-party specialty platforms and Algo trading APIs
- Low trading fees
- Doesn’t come with any share coverage
- Equipped with weak CFD coverage
- Only has limited product portfolio
- Using specialty platforms will incur fees
- Has high AUD, and USD trading fees
FXCM stands for Forex Capital Market and it is a broker offering both forex and CFDs. It was established in 1999 and is based in the United Kingdom. Its main shareholder is the Jefferies Financial Group, and is listed on the New York Stock Exchange. It possesses an investment background with Leucadia Investments acting as the merchant banking arm of the group.
FXCM’s long track record, and regulation oversight from top-tier financial authorities like Australian’s ASIC, and the UK’s FCA are what makes it to be considered safe.
In addition to Australia, FXCM is also licensed in the United Kingdom, South Africa, and several European Union countries such as Germany, France, Italy. In total, its range extends to 10 sales offices across five countries.
Clients have two widely available options to open forex, CFDs, and spread bets on FXCM. The first is via the broker’s own homegrown Trading Station application, which includes a lot of robust features. The other is through the industry renowned MetaTrader4 platform.
FXCM provides both a mobile app and desktop experience in its Trading Station platform. The desktop provides social/copy trading through ZuluTrade, and caters well to traders of all skill-levels. In addition, it comes equipped with multiple APIs and third-party applications. Another tradable platform for FXCM is Ninjatrader.
Another distinguishing factor of FXCM’s desktop platform is its charting tool known as Marketscope 2.0, which is a powerful charting package running parallel with the main platform window for easy visibility.
With regard to its mobile app, FXCM provides the Trading Station app in both web, Android and IOS versions. And FXCM has done a remarkable job to ensure that it is much more feature rich than the alternative MT4 mobile apps. The mobile app is infused with a broad range of technical indicators,
However, the mobile app feels dated and old-fashioned; the layout apparently not yet optimized for newer versions of the iOS. The desktop application is its marquee platform as it provides a full-scale trading experience.
The Trading Station traditional web version runs as smoothly as its desktop and mobile counterparts. It boosts a respectable array of features such as market data signals, news, research, videos, and external source links. Remarkably, its equivalent chart application packs almost as many indicators as the desktop app, with 50 available.
Overall, the trading platform is extremely customizable, offering users the ability to compile and save their own layouts. In addition, it provides different order types to choose from.
On the downside, while the FXCM trading platform makes it easy and fast to open an account, it is not very user-friendly. To compound the problem, its security is also not very good because it lacks two-factor authentication. Its search functionality is poor, setting up alerts and notifications is cumbersome since you have to use the client portal, FXCM Plus since it cannot be done on the desktop trading platform.
Push notifications aren’t enabled for its Android app: however, this oversight isn’t exclusive to FXCM because most organizations skimm on their Android features in favor of iOS.
There are four account types provided by FXCM, namely:
- ☑️ Individual – Standard
- ☑️ Individual – Active Trader – This is best for high-volume trades. It also ensures better spreads and comes equipped with better customer support compared with the standard account.
- ☑️ Joint
- ☑️ Corporate
In addition to these, FXCM provides traders with a free practice account with up to 20,000 of virtual money to hone their trading skills.
FXCM comes with exceptional technical research tools, equipped with educational content and technical indicators of high quality that serves investors and traders well.
However, FXCM is only equipped with a limited selection of tradable products. Juxtaposed alongside 39 currency pairs, FXCM provides only 32 CFD with no single stock CFDs.
It provides only three base currencies, compared to 10 for Pepperstone.
Forex Trading Buying Guide
What Is Forex Trading?
The foreign exchange (abbreviated as FX or Forex for short) is a global market that exists for the purpose of purchasing or trading national currencies. This over-the-counter, decentralized market determines rates for currencies and allows trading 24 hours a day, five days a week.
Trading in forex always occurs in a currency pair; an investor trades in one currency while simultaneously buying another. Currencies are usually listed as three letter codes, the initial two letters denoting the region while the third represents the currency itself.
For instance, USD means the United States dollar, while the JPY stands for the Japanese yen.
Why Do People Trade in Forex?
The bulk of actively traded market activity in the world comes from forex, where it has amassed an actively daily trading volume of $5 trillion.
Because of the size and preeminence of their economies, there are seven major currency pairs that are frequently traded due to their massive liquidity. some of the most traded FOREX pairs are:
- ☑️ EUR/USD: the euro versus the US dollar.
- ☑️ GBP/USD: the British pound trading against the US dollar.
- ☑️ USD/JPY: the US dollar against the Japanese yen.
- ☑️ USD/CHF: the US dollar versus the Swiss franc.
- ☑️ USD/CAD: the US dollar versus Canadian dollar.
- ☑️ AUD/USD: the Australian dollar against the US dollar.
- ☑️ NZD/USD: the New Zealand dollar against the US dollar.
To keep things well organized for trades, most forex exchange providers split the pairs into the following categories:
Exotics: This is a major currency against one from an emerging or small economy. Examples are EUR/CZK, GBP/MXN, and USD/PLN.
Regotional Pairs: As the name suggests, these pairs are classified by regions. A good example would be Australasia or Scandinavia.
Major Pairs: In a reflection of the Pareto rule, seven currencies make up 80%. These have already been specified above.
Minor Pairs: These pairs often feature major currencies against each other, but without the dollar. However, they are less frequently traded and include the following: EUR/CHF, EUR/GBP, GBP/JPY
How Safe Is It to Trade Forex in Australia?
It is safe to trade forex in Australia but you have to do your due diligence on the forex and CFD companies are regulated by the ASIC, so if an issue arises with the provider, you can take it up with the Financial Services Ombudsman (FOS).
ASIC is one of the most esteemed regulatory bodies in the world. In order to protect the integrity of the financial markets, the ASIC requires all forex brokers operating in Australia to observe a set of guidelines to ensure ethical uniformity of trading conditions.
What Is CFD Trading?
CFD simply means “Contract for Difference.” In CFD trading, an individual engages in contract with a CFD broker rather than purchase the underlying asset directly themselves.
While we’ve maintained in our disclaimer that you are at risk of losing capital with CFDs, they actually help investors to apply leverage by gaining exposure with less capital. CFDs also enable investors to take advantage of market movements to trade long or short, and diversify with ease by trading a variety of market assets.
What Is the Difference Between Forex and CFD Trading?
Both forex and CFDs are the two most popular choices amongst traders and they share important similarities and differences that you should be aware of before entering the market.
By learning what makes forex and CFDs different, a trader can make better informed decisions in order to build their own trading strategy.
One of the similarities is that they are both executed OTC – which simply means over-the-counter. They carry similar transaction costs, spreads, commissions, and overnight rollover swaps. Both can also be traded in rising markets, meaning that a trader can decide to go long or short.
Whether you are trading CFDs or forex, the underlying asset isn’t owned by you; you are only speculating whether its price will rise or fall.
In terms of their differences, CFDs cover a diverse range of markets indices, stocks, metals, and commodities. Forex, on the other hand, is limited to the currency market only.
Depending on the contract you select for CFD trading, a trader can expect variations in the base currency. With forex, the lot size is always uniform regardless of which currency you pay.
What is Leverage, Spreads, and Margins in Forex Trading?
On a trade, a spread is the difference between the buy and sell price. Leverage involves borrowing a certain amount of money required to buy or invest in something. In financial markets, it allows you to increase your exposure to financial markets without the risk of having to commit as much capital.
Margin is the initial deposit you put down to open up and maintain a leverage position. It is described as a percentage of the full position. So, if the margin is 2%, a trader is only required to deposit 2% of the total value of the position for it to be opened. Therefore, on a EUR/USD trade of $10,000, the trader only needs to deposit $200 to get full exposure, even though they are still risking $10,000.
Currency Pairs and Pips
In this currency pair, the first is called the base, while the second is the quote currency. Currency codes are defined by ISO 4217. If a trade involves a EUR/USD rate of 1.2500, this translates to €1 being equivalent to US$1.2500.
Pip stands for percentage in point or price interest point and it expresses the smallest price change which a given exchange rate can take. An example will suffice: the EUR/USD pair is priced to four decimal places. Therefore, a pip will constitute a unit change in the fourth decimal place.
As a result, when the exchange rate changes from 1.4500 to 1.4505, it is said to have increased by 5 pips.
Lot Size in Forex
In forex you trade in specific amounts called lots. These lots represent the number of currency units that you can buy or sell. Normally, traders refer to based on increments of 1,000 usually referred to as Micro lots. But there are other sizes such as Standard (100,000), Mini (10,000), and Nano (100).
Why are lot sizes important? Well, because the lot size gives an indication on the type of risk you are taking.
Australian Forex Laws Guide
In Australia, forex trading is regulated by the Australian Securities and Investment Commision (ASIC). Nevertheless, the ASIC isn’t the main financial regulatory pillar in Australia; that distinction belongs to the Australian Prudential Regulatory Authority (APRA).
To operate a forex trading platform in Australia, you must first obtain a license with ASIC. This serves as a sort of insurance to any user that a broker with the license complies with ASIC’s standards. You can look up the list of brokerages that hold ASIC licenses on the regulatory body’s Professional Register.
Forex Limits Imposed by the ASIC
Unlike countries like the United States where there are official limits, the ASIC Act of 2001 doesn’t grant the regulatory body any authority to enforce forex leverage restrictions on forex brokers.
Nevertheless, a lot of forex trading platforms both operating within and outside Australia have a leverage of up to 500:1. However, if you’re still new to the trading platform, don’t expect yours to be this high since leverage is awarded based on account history and the positions you want to trade.
How Do You Trade Forex in Australia?
The documents required to sign-up to trade forex are mainly two: 1) Proof of Identity (Usually a passport or some state issued ID such as drivers license). 2) Proof of Residence
Once submitted and verified by the broker, you should be able to deposit funds and commence trading.
Paying Taxes on Forex Trading
Just like any other profits made with your business or other investments, any money you make with forex trading online in Australia is taxable. Since forex brokerage sign-up procedures require you to submit personal and banking information, your account activity is actively being logged by the brokerage. Therefore, it isn’t advisable to neglect to file your taxes.
How Is Forex Taxed in Australia?
The tax stipulations can be found in the provisions of Australia’s Income Tax Assessment Act under Division 755 and sub-divisions 960 C & D. It requires traders to report any gains as assessable income and losses as deductions.
In Australia, trading forex has become quite popular; not only with residents, but also with international traders looking for Australian-based brokers. However, forex trading doesn’t take place in a regulated exchange, nor is it controlled by a central governing body.
Because of these factors, there are several moving parts to consider in choosing a brokerage trading platform. Chief among them is the security of traders’ funds, which depends to a large extent on the clout and ability of its regulatory authority to maintain integrity of transactions on the platform.
The other important factor is the reputation of the brokerage, the robustness of its features, along with its service delivery. We have provided what we consider as the blue-chip trading brokerages that offer unique competitive advantages to traders.
Related: Best Options Trading Platform